The report, which is based on an online survey of 686 charities carried out between 31 July and 2 October, says that although 82 per cent of respondents said they were confident they could sustain themselves financially over the next year, this figure fell to 47 per cent when respondents were asked to look forward five years.

More than three-quarters of charities surveyed – 78 per cent – said they had experienced a rise in demand for their services over the past year.

Researchers found that although 85 per cent of organisations said they expected demand to rise over the coming year, only 14 per cent of those groups said they were sufficiently resourced for this.

"There are well-founded fears about the prospects of long-term survival across the sector, with many groups facing a dispiriting trade-off between the quality and the durability of their services," the report says.

"These circumstances have resulted in a culture of short-termism and risk-aversion that has left the sector lagging in areas that will be key to its long-term vitality."

The report, which is produced annually and is in its third year, estimates that the value of volunteers to the local charity sector is between £7.5bn and £10.5bn a year.

It says almost half of respondents – 45 per cent – said they were unlikely to be compliant with the new General Data Protection Regulation, which comes into force on 25 May.

More than seven in 10 respondents said they were concerned that their organisations did not have the requisite skills to run successful fundraising campaigns, the report says.

The report calls for better communication channels between the local voluntary sector and government and improved capacity-building programmes to help grass-roots organisations diversify their income streams and prepare for increases in service demand.

Lewis Garland, who wrote the report, said: "Our report has revealed a sector stretched well beyond its capacity.

"Local charities have been expected to fill the gaps left by public sector cuts, while simultaneously competing for dwindling funding opportunities.

"If the sector is to survive, let alone flourish, it is essential that local charities are actively included in key decision-making processes, both at the local and national level. Furthermore, we must find ways to increase and diversify the funding and support available to these groups".